Recurring revenue model for web designers and developers [webinar]

Recurring revenue is presented by experts time and time again as the best solution to unpredictable client work. It isn’t easy running your own business without the safety net of knowing how much you will net in revenue each month (or how much you will spend for that matter). The problem, however, is that I commonly see website professionals going to extremes in their initial solutions for creating a recurring revenue model.

Instead of dipping their toes into the pool and gliding in with floaties, newbies often jump in the deep end, need rescuing and subsequent resuscitation. It’s not unheard of for most to stare baffled at their failure and exclaim, “I guess it’s just not for me.”

Recurring revenue is easier to obtain than you think.

In this post, we’ll explore the tender ways to enter the pool with floaties, some glaring warnings about jumping into the deep end, and what practical ways to create a healthy transition into establishing a recurring revenue model so you can secure a more reliable business model.

Aim to pay yourself a salary

In a normal, 40-hour-a-week job, you’re given a set salary which gives you the freedom to manage your personal expenses. When you switch to managing your own business, your total revenue has to not only become the source of your salary, but your tax obligations to the state and pot for business expenses, employee payroll, materials and vendors.

Let’s be honest — the salary for yourself is often last, not first, on that list. Can you confidently say you know exactly how much you will pay yourself each month? This inconsistency in self-employment revenue is why many website professionals seek “recurring” revenue.

Before I established recurring revenue in my business, I didn’t pay myself a salary. Every month, I just took whatever was leftover after I paid taxes, expenses, materials and vendors. Once I established a recurring revenue model, I was able to setup an automatic payment to myself every two weeks as a set “salary.” I’ve never had to adjust that amount down in number, only up!

Enter with the right motives

If we look at the right motives for establishing recurring revenue and the wrong motives for establishing recurring revenue, we begin to see where others are guilty of leaping into the deep end too soon.

The right motives often include desires to:

Have predictable revenue to set a salary for yourself on a monthly basis

Have predictable revenue to hire an employee without the fear their paycheck will not be covered

Ease the burden of lead generation for more project work

Remove the need for over-burdening project work to make ends meet

The wrong motives stem from these common misconceptions about recurring revenue:

Recurring revenue is passive income and allows you to spend months without working in or on the business (FALSE)

Recurring revenue will increase total profit tenfold and allow you to sell the business within a year (FALSE)

Recurring revenue will easily allow you to abandon all difficult clients and client work for a completely new field, target market and demographic (FALSE)

When your motives to establish a recurring revenue model are to free yourself from all work, a troublesome business, or a target market, I would warn that you might be running away from one problem only to create a new one.

Easing into recurring revenue is best done when it is first established to serve your current business. This path is the best way to generate immediate success.

I’m not saying that the wrong motives are bad goals, just troublesome for the immediate future of implementing recurring revenue if this is a new path for you and your business.

To do this right, you have to put on the floaties and get your feet wet.

Create a recurring revenue model for your WordPress business in 3 steps

Ready to learn how to add recurring revenue to your business? Take a look to see how it’s done.

Offer a productized service.

Create a new product.

Offer white-labeled products.

For the sake of this article, and using examples, we’ll stick to different ways you can add recurring revenue to your WordPress business.

Website care plans are a great way to dip your toes into the water of recurring revenue, as they are easy to standardize. You update the software, monitor the install, and provide a support desk for requests from your client within a certain period of time or number of requests.

At the deep end of the pool, many website pros jump in by not standardizing their plan. They customize packages to each client’s needs and high-level customizations. Quickly, they find themselves drowning in poor execution.

Profit from standardization

Where does the real profit come from when services become recurring revenue products? It comes from the ability to predict how much of your time and resources will be spent on a monthly basis. This includes the ways in which the time is spent or tools that carry out the process. For example, utilizing ManageWP for website updates might take your website update process from 30 minutes to five minutes. This doesn’t degrade your quality of service, but allows you more time in the monthly package to offer more value to the client.

To that point, hourly packages are NOT a successful source of recurring revenue when hours can be allocated to any request, carry over into the next month, and don’t follow a standardized set of processes.

Devising different levels of standardized plans for either website care or website design packages, and offering them to your past client list is the fastest way to get immediate success with recurring revenue.

2. Create a new product

Popular recurring revenue products that don’t involve a service are products you create once, like a membership website, training or software, and sell to a mass audience on a subscription.

Online training is a popular choice, and I think a great first choice for getting your feet wet.

Online training is simply answering questions — and answering questions can be very valuable. An online course can simply be just recording yourself providing solutions to a problem in the form of resources. Charging money in exchange for this one-time creation is the allure of online training.

Think recurring revenue in exchange for recurring value

The pitfall of new-course creators, however, is thinking of this product as one-time transaction. One-time transactions, even to a million people, are technically not recurring revenue (at least not the type we are talking about). Recurring revenue is revenue in exchange for recurring value.

Online training needs to be on a subscription model to be considered recurring revenue, which means you have to think about a continual supply of resources to allow for this product to flourish.

In the same way, if you want a plugin to be considered recurring revenue, it’s best to frame it as an ongoing license. Video User Manuals (VUM) provides WordPress training in your client’s dashboard so you don’t have to. With every update of WordPress, VUM releases new videos to coincide with the platform changes. This update is recurring value and why the plugin customers pay a recurring monthly fee to use the plugin.

Beginning with a piece of training or software that currently supports your client list is a safe way to dip your toes in. You want it to give you some relief so you can see clearly the path you should forge into a bigger product down the road.

3. Offer white-labeled products

Did you know that, when creating a recurring revenue model, the products don’t even need to be your own? There are numerous white-label options someone else has created for you to resell.

The most popular in our field is website hosting, and it’s a fast way to get your feet wet in recurring revenue.

A word of warning, however: If you choose to resell hosting, make sure you set up your clients in a way that allows for a clean break. When reselling anything, always think of an exit and what you would do if things go sour.

Add in your value to any white-label

For those that want to venture a bit deeper in the water of white-labeling, there are SEO companies, copyediting and other services that allow you to white-label their services. You as the website professional stay client facing, and they provide the recurring services. Again, like in the first point, always be clear about the standardization of what you are providing your client. Keep in mind the quality and execution or any provider you are reselling, as ultimately this will fall back on you as the one who engages with the client legally.

In white-labeling for recurring revenue, always think about the value you are adding. Why are your clients going through you, and how can you add value that makes going with you a no-brainer?

Back to the plugin Video User Manuals. By placing their plugin of video tutorials in a client’s site, you can leverage this white-labeling because you can charge a small fee for the training you are supplying your client. To add value, all you need to do is add your own custom training videos to the library via their documentation. By doing that, you add another level of value that supersedes the white-labeled service or product and sets you apart.

There’s no value to passive income

In creating a product, it might be tempting to think of it as “passive income.” However, if you are planning on the product being a source for recurring revenue, this is a dangerous approach.

You’ll see it claimed by many gurus that once you create a product, it’s forked and your work is basically done — all you need to do is resell it month after month. The issue you’ll find is that each customer, if not recurring, is a new lead.

“Recurring” revenue means that the customer’s payment is continual, which decreases demand for new leads as those customers grow.

Recurring revenue products, especially ones like online training and software, not only require a lot of work up front, but also the “attention to retention.” If your customer continues to pay you, you need to add value to your recurring paying customers on some level.

Don’t be fooled by the “passive income” false notion.

Ease the burden

After the initial foray into establishing a recurring revenue model, you will begin to feel some of the burden of your current situation lifted. Whichever of the three options you choose, make sure to be mindful of your current target market. Listen closely to what are they asking for, what’s working, what’s not and use that to create a more robust solution for that market as you swim further into the deep end.

You might find you love training, you might find you hate it! You might find you shine with client relationships, and you might find you like being the tech whiz and leaving relationships with a sales guy.

Whatever you do, don’t forget that you are creating recurring revenue in exchange for recurring value. Ease into the pool and lighten your burden of client work. Pick the solution that works for you business now, and enjoy the swim!

Editor’s note: Are you earning recurring revenue for your business? Do you need help figuring out how to add recurring revenue? Share your experiences and challenges in the GoDaddy community.

Kristina Romero is a digital business consultant working with small businesses and entrepreneurs. She began as a website developer with her company KR Media & Designs creating websites for companies that included Coca-Cola Company, Food Network, and Hollywood celebrities. Kristina is also the founder of WP Care Market where she connects small business owners with quality website professionals for ongoing website care.

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